Thank-you, Cells vs. Land Lines, DOW, Homebuilders
– Thank you for the mention
– Actually considering getting rid of ours…
– 4% yield
– This is a good sign…
Thank-you, Cells vs. Land Lines, DOW, Homebuilders
– Thank you for the mention
– Actually considering getting rid of ours…
– 4% yield
– This is a good sign…
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A recent article by Sears Holdings (SHLD) Chairman Eddie Lampert gives some insight into recent buying activity.
The article, entitled "The Best Advice I Ever Got" said:
"Almost every weekend when I was 7, 8, 9, 10 years old, my father and I would toss a football in the yard or play basketball in the driveway. When we played football, he'd say, "Go out ten steps. Turn to your right." The ball would reach me just before I turned, and it would hit me right in the chest. Why would my dad do this? He told me, "If I waited for you to turn, you and the defensive player would have an equal chance to get the ball. Your opportunity is gone."
This idea of anticipation is key to investing and to business generally. You can't wait for an opportunity to become obvious. You have to think, "Here's what other people and companies have done under certain circumstances. Now, under these new circumstances, how is this management likely to behave?" The plays my father designed for me helped me learn to think ahead. Lots of days I asked him, "Why can't we just invite kids over and play a game?" In order to do something well, he explained, you have to keep practicing and preparing."
My guess is that when one looks at Lampert's recent buying spree in shares of AutoNation (AN), the above statements are the genesis. For instance, Lampert has held shares in the company since the turn of the century and is extremely familiar with it and its machinations.
That being said, while other investors are fleeing the retail auto sector Lampert has been buying about a million shares every other week for the past few months. Why?
Perhaps he sees that CEO Mike Jackson has expanded the retailer's dealership pipeline with Mercedes and BMW (BMW) dealerships, more resistant to economic downturns and much more profitable in good times than your run of the mill Ford (F) or GM (GM) one.
Perhaps he sees, that looking ahead leases on vehicles still expire requiring the leasee to either lease or buy another one and that the current stock price reflects the poor environment now, but now the upcoming surge in activity down the road?
Perhaps he knows that while credit is tight now, all that does is to suppress demand, not eliminate it. He knows the demand (desire) for a new vehicle does not "go away". The desire to get rid of an old car for a new one stays and when credit does loosen a bit, the spigot will open and the pent-up demand becomes a flood of buyers.
Also, he knows CEO Jackson manages the business for the long term. During the sluggish auto environment in 2001, many dealers responded to deteriorating demand by offering 0% loans which after even small credit losses meant the loan portfolios eventually lost money. Jackson said at the time he did not see the reasoning for "losing money on loans just to move metal". Shares tripled from then levels.
It is clear that Warren Buffett from Berkshire (BRK.a) sees it as he has purchased shares of CarMax (KMX) another auto retailer. The boys over at Leucadia (LUK) also see it with their 30% investment in auto finance company AmeriCredit (ACF) along with Bruce Berkowitz and Bill Miller who have also taken stakes in ACF.
Disclosure ("none" means no position):Long SHLD, None
Here are the week’s top stories at Value Investing News
VIN should be “Buffet Investing News” so far in May. Todd Sullivan explains why too much Buffett may be a bad thing.
Joe Ponzio details his reasoning for buying the small company stock of Graham Corporation, the unique attributes of small caps, and why he decided to sell when he did.
On Wednesday the 7th, Dr Pepper Snapple Group (DPS) officially began to trade. Its $25 price tag is lower than many expected after the soft-drink maker was spun-off of its parent company, Cadbury Schweppes.
88% invested in financials…
Garmin is the dominant player in the fast growing GPS market. The company has delivered nearly 50% annual earnings growth since 2003, and is expected to grow at 17% per year going forward. With it’s current 11 P/E, is Garmin a textbook example of growth at a reasonable price?
Wesco Annual Meeting, May 7, 2008
It sounds crazy that Warren Buffett and Jim Rogers might have something in common besides intellect and wealth. Buffett has owned the Washington Post for 35 years, Coca-Cola for 18 years.
I thought Shai Dardasti’s personal reflections from 20,000 feet were spot on and worth thinking about. I have a few other companies that are royalties on various activities that I would add to the list, and I bet you do too.
I finished David Einhorn’s investing “novel” Fooling Some of the People All of the Time this afternoon, and I have nothing but praise.
First Eagle Funds Conference Call
In this series of blog posts, I will walk through all 25 of the biases Mr. Munger identifies, and then adapt them for the modern entrepreneur. In each case I will start with relevant excerpts of Mr. Munger’s speech, and then after that add my own thoughts.
Here is why Oil shouldn’t go to $200 a barrel. Notice I didn’t say won’t go to $200, as betting against a commodity in this market is tantamount to financial suicide.
Barron’s recently caught up with Tananbaum, 42, at his midtown office, which houses a portion of his art collection, including the spacesuits by artist Tom Sachs shown in the photo at right.
Barron’s: What is happening in the credit markets, where conditions since August have been very tough?
Morningstar chat with Legg Mason’s Bill Miller.
Secret strategies of the game, with Neil Chriss, Hutchin Hill Capital; David Einhorn, Greenlight Capital Management and CNBC’s Becky Quick
After a few week’s of wondering why I cannot tun on the tube without sees Berkshire’s (BRK.A) Chairman on it either in an interview or an a soap, it appears I am not the only one.
Now, is this a bad omen for shareholders? I do not think so. I think is will eventually tarnish Buffett’s legacy. Why? The more you saw and the more you predict to more people to more likely you are to be wrong. When that inevitably happens, some folks will seize on it and attempt to define him with it..
Buffett’s is also starting to be accused of “talking his book”. That is never a good thing and it then casts a shadow on everything you say from being “analytical” to perhaps trying to influence the results of one’s investments publicly. In the past Buffett was heard from once or twice a year and what he said was gospel. I have notice lately that his proclamations are beginning to be lumped in with the rest of the “noise” out there.
Where he the company’s “former” chairman and not running the book, none of this would be a big deal at all. But, since he is, there are more mumbling’s out there.
It is only a matter of time that the books start coming out now that he is giving them fodder on almost a daily basis…
Disclosure (“none” means no position):None
Tax Endowments, Buffett, NBA
– Finally a good tax idea. Give them the choice, lower tuition or pony up…
– Enough Warren. I am getting “Warrened Out”…
– Goes to show how pathetic the NBA is. Its #1 pitchman is a rapist.
–
Tax Endowments, Buffett, NBA
– Finally a good tax idea. Give them the choice, lower tuition or pony up…
– Enough Warren. I am getting “Warrened Out”…
– Goes to show how pathetic the NBA is. Its #1 pitchman is a rapist.
–
Here are the week’s top ten at Value Investing News
Wesco Annual Meeting, May 7, 2008
Notes courtesy of Peter Boodell
NBR anchor Susie Gharib talks with Berkshire Hathaway chairman and CEO Warren Buffett at his company’s 2008 shareholders’ meeting in Omaha, Nebraska. This extended interview is a web exclusive.
EXCLUSIVE: Warren Buffett and Bill Gates reveal their thoughts to FOX Business on the Microsoft-Yahoo fallout, the state of the economy and where they are looking to invest next
THIS IS A LIVE BLOG OF THE QUESTION-AND-ANSWER SESSION BEING HELD BY WARREN BUFFETT AND CHARLIE MUNGER AT THE BERKSHIRE HATHAWAY ANNUAL SHAREHOLDERS MEETING IN OMAHA. MOST RECENT DISPATCHES WILL APPEAR AT THE TOP. ALL TIMES ARE CENTRAL.
THIS IS THE FIRST HALF OF THE BERKSHIRE HATHAWAY ANNUAL SHAREHOLDERS MEETING AT THE QWEST ARENA IN OMAHA, NEBRASKA ON SATURDAY, MAY 3, 2008 AS LIVE-BLOGGED ON WARREN BUFFETT WATCH. ALL TIMES ARE CENTRAL.
On Wednesday the 7th, Dr Pepper Snapple Group (DPS) officially began to trade. Its $25 price tag is lower than many expected after the soft-drink maker was spun-off of its parent company, Cadbury Schweppes.
Pabrai began by reiterating the notion that we as investors or entrepreneurs should look for opportunities with low risk but high uncertainty. If your risk is low, losses will be not break you. Since Wall Street hates uncertainty, it tends to misinterpret certain situations and companies, over-punishing them in the process. This gives patient, diligent value investors a potential advantage.
The Mortgage Crisis
Whitney Tilson and Glenn Tongue of T2 Partners kicked off day 2 with a sobering look at the mortgage crisis. For his part, Tilson believes that we have not yet seen the worst.
Ken Shubin Stein, of Spencer Capital, laid out his philosophy, which includes:
• Looking for asymmetric payoffs (limited downside, with much upside)
• Bottom-up fundamental analysis
• A “scientific” research process
• Belief that volatility is the key to successful long term investing
Just returned from the Wesco shareholders meeting and, in general, felt the questions were much better than the ones asked at the BRK meeting. Yes, there were still the occasional, “How do I make a gazillion dollars like you did?” questions, but many more questions were about the future of the economy, derivatives, and BRK/WSC.
Charlie Munger, Warren Buffett’s alter ego at Berkshire (BRK.A), is a great talker. Currently I prefer him to Warren if for no other reason Warren is simply overexposed currently and offers nothing new for us when he talks. Munger on the other hand is great and pulls no punches
Shai Dardashti documents the meeting:
Disclosure (“none” means no position):None
After the better part of two years of incorrect predictions and an autopsy of what lead to the current credit environment, and his flaccid defense of his termAlan Greenspan’s statements no longer effect markets……thank god.
In a NY speach Greenspan said that the worst of the credit crunch was over. Now, this simply follows statements from Merrill Lynch’s (MER) John Thain, JP Morgan’s (JPM) Jamie Dimon, Berkshire’s (BRK.A) Warren Buffett and Treasury Secretary Hank Paulson saying the exact same thing.
The difference this time is that back in early 2007 when Greenspan was predicting a recession that has not developed, his words moved the market. Anything at the time out of the former Fed Head’s mouth was run on CNBC and front page news in the papers.
Now thankfully it merits little more than a 200 word article on the web.
It is funny how history judges us based on the results of our actions. Greenspan’s legacy was tarnished when years of virtually free money finally caught up to homeowners and his actions and statements since leaving the Fed have only hurt it more.
Has he just kept quiet after leaving, the current situation would have dissipated and his legacy may have remained in tact. But, by involving himself in it now and in effect hindering the efforts of his successor, Greenspan just may have permanently harm it….
Here are the week’s most popular at Value Investing News
Buffett’s municipal bond insurer, Berkshire Hathaway Assurance Corp., gains AAA rating from Moody’s. The competition is acting like there is nothing to worry about by this new entrant, but Buffett and Ajit Jain are not newbies in risk pricing.
Notes from two speeches given by Francis Chou at the Ben Graham Center for Value Investing
How effective has the Federal Reserve been in heading off a financial and economic crisis? What’s left in its arsenal? We’ll ask NYU economist Mark Gertler, a close friend and collaborator of Federal Reserve Chairman Ben Bernanke. What role have the regulators played and what can investors do to protect their assets?
We all make mistakes, even if our names are Buffett or Soros. But when great investors such as Warren Buffett and George Soros make a mistake, the lessons for the rest of us are so much more interesting.
The Ten Commandments of Growth Investing
Bud Labitan’s self published new book, The Four Filters: Invention of Warren Buffett and Charlie Munger, is now on sale.
Peter Bernstein has witnessed just about every financial crisis of the past century.
Despite attractive economics and the potential for lasting competitive advantages, the Software sector is not a favorite of the Magic Formula screen. I examine why in this article, as well as providing some attributes to look for when picking a Software company from the screen.
Warren Buffett spoke live this morning (Monday) with CNBC’s Squawk Box about his role in today’s $23 billion Mars acquisition of Wrigley.
Mars Inc. and Warren Buffett’s Berkshire Hathaway Inc. were close to a pact to acquire Wm. Wrigley Jr. Co. for more than $22 billion, according to people familiar with the matter, in a deal that would remake the global confectionery landscape…
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Miley, Obama, Weitz, iPhone v Blackberry
– Agreed, Mr. Friedman nails it here
– Too little too late. You had your chance and blew it. This rings hollow
– Weitz is one of the great one. It bears listening to what he says
– 10 Reasons the iPhone is NOT a Blackberry
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Miley, Obama, Weitz, iPhone v Blackberry
– Agreed, Mr. Friedman nails it here
– Too little too late. You had your chance and blew it. This rings hollow
– Weitz is one of the great one. It bears listening to what he says
– 10 Reasons the iPhone is NOT a Blackberry
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Far from a recession, the economy is still growing…
The U.S. Commerce Department said the economy grew at an annual rate of 0.6% in the first three months of the year, in an initial estimate of gross domestic product for the quarter. The growth matches that of 2007’s final period.
Housing hit the economy. Residential fixed investment dropped by 26.7%, reducing overall GDP by 1.23 percentage points. In short, GDP growth absent housing as an acceptable 1.8%.
Now, clearly financials like Citigroup (C), Wachovia (WB), Merrill Lynch (MER) and Bank of America (BAC) and their investors have suffered. If you are an investor in housing related stocks like Centex (CTX), USG (USG) and DR Horton (DRH) the last thing you want to hear is that the economy is not in recession. In your corner of the world it clearly is. However, while the economy as a whole is growing at a far from acceptable rate, it is STILL GROWING.
Even Berkshire’s (BRK.A) Warren Buffett jumped on the recession call yesterday saying we were already in one. I have to ask Warren on this one. He always says he does not invest on “macro forecasts” because they are never accurate. He also replies when asked about what is going to happen in the future “I have no idea”. My question then is, “why then is he making macro predictions and forecasts now?” To be honest, Warren is the greatest investor ever but he is on TV just way too much lately. What he said meant more when we heard from him occasionally, rather than weekly.
I feel bad for those making the treck out to Omaha this weekend for the annual meeting. What could they possibly hear from him he has not said at least 5 times in the scores of interviews he has done the past two months? I have done it in the past and it is a great time. But, we were hearing new stuff back then, not the rehash this years attendees will get..
Anyway, this quarters growth illustrates the strength of the economy. To take the massive hits from both housing and the credit markets and to be still expanding is quite impressive.
These numbers now push the odds of having an actual recession even lower than they were a month ago. In order to actually have a recession now we need the spring and summer numbers to contract. The need for this from the recession camp is facing strong headwinds as last years rate cuts begin to hit the system and $150 billion in stimulus checks start showing up on consumers doorsteps.
Should Bernake & Co. take steps today the strengthen the dollar, we can add lower energy and food prices to the list. Does this mean we jump to 2% to 3% growth this summer? No. It does mean we ought not see a negative number and given what has happened the last 12 months, that is just fine.
People were fond of saying Alan Greenspan engineered a “soft landing” when he was the head of the Fed. When this is all over, Bernanke ought to be credited with engineering a “fly by” in far more difficult circumstances.
Disclosure (“none” means no position):Long C,WB ,None
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Been getting a deluge of email since Lampert’s big buying in AutonNation(AN). Here we go.
Overview:
AutoNation (AN) operates as an automotive retailer in the United States. As of December 31, 2007, it owned and operated 322 vehicle franchises from 244 stores located in major metropolitan markets, predominantly in the Sunbelt region of the United States. Its stores sell 38 different brands of vehicles. Core brands of vehicles sold, representing more than 96% of the vehicles sold, were manufactured by Toyota, Ford, General Motors, Honda, Nissan, Chrysler, Daimler and BMW.
Despite Q1 EPS from continuing operations of $0.31 compared to a year ago of $0.39, AutoNation did outperform the U.S. retail auto sales market as it declined 11% according to CNW Research vs 8% for the company. In its main markets of California, Florida, Nevada, and Arizona, AutoNation’s new unit sales were down 11% vs approximately 15% according for the industry according to CNW Research.
Industry analysts like CNW and J.D. Power forecast improved new vehicle sales beginning in 2009 due to fleet age and increase in vehicle scrappage, and a robust line-up of new products. CNW forecast new vehicle sales of 16.3 million in 2009, 16.7 million in 2010, and 16.9 million in 2011. We concur with this assessment for future new vehicle sales.
During Q1,they repurchased 1.9 million shares of stock (1% of total) at an average price of $14.84 per share for a total of $28 million. Future repurchases are subject to limitations contained in debt agreements. As of April 1, 2008, they had capacity for share repurchases of approximately $32 million. They are permitted to add back 50% of net income after tax and any stock option exercise proceeds for additional repurchases.
Actually, that is a very unique and disciplined way to do it.
Non-vehicle debt-to-capital ratio was 33% at the end of the most recent quarter and spent $29 million on the acquisition of a BMW dealership. Inventory was at 57 days, 5 days higher than last year.
Shares are down 25% over the past year based on the economy.
Buffett, Lampert and other value investors have been buying into the auto industry. The key to remember if you are so inclines is to stay away from the likes of Ford (F) and GM (GM) and stick with the retailers. When the economy improves, so will their business. A stock price down 25% vs a 15% EPS decline? Sounds like an opportunity, especially when you consider the share count reduction that will cause EPS to jump on the other side of the rebound.
I think one could wait until summer to pick up shares and not pay much more than today. It may not be such a bad idea…
Disclosure (“none” means no position):None
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